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Craigslist Meets the Capitalists

By Dealbook December 8, 2006 12:51 pmDecember 8, 2006 12:51 pm

Jim Buckmaster, the chief executive of Craigslist, caused lots of head-scratching Thursday as he tried to explain to a bunch of Wall Street types why his company is not interested in “monetizing” his ridiculously popular Web operation. Appearing at the UBS global media conference in New York, Mr. Buckmaster took questions from the bemused audience, which apparently could not get its collective mind around the notion that Craigslist exists to help Web users find jobs, cars, apartments and dates — and not so much to make money.

Wendy Davis of MediaPost describes the presentation as a “a culture clash of near-epic proportions.” She recounts how UBS analyst Ben Schachter wanted to know how Craigslist plans to maximize revenue. It doesn’t, Mr. Buckmaster replied (perhaps wondering how Mr. Schachter could possibly not already know this). “That definitely is not part of the equation,” he said, according to MediaPost. “It’s not part of the goal.”

“I think a lot of people are catching their breath right now,” Mr. Schachter said in response.

Craigslist charges money for job listings, but only in seven of the cities it serves ($75 in San Francisco; $25 in the others). And it charges for apartment listings in New York ($10 a pop). But that is just to pay expenses.

Mr. Schachter still did not seem to understand. How about running AdSense ads from Google? Craigslist has considered that, Mr. Buckmaster said. They even crunched the numbers, which were “quite staggering.” But users haven’t expressed an interest in seeing ads, so it is not going to happen.

Following the meeting, Mr. Schachter wrote a research note, flagged by Tech Trader Daily, which suggests that he still doesn’t quite get the concept of serving customers first, and worrying about revenues later, if at all (and nevermind profits). Craigslist, the analyst wrote, “does not fully monetize its traffic or services.”

Mr. Buckmaster said the company is doubling in size every year, as measured by page views and listings.

Larry Dignan, writing on Between the Lines blog at ZDNet, called Mr. Buckmaster “delightfully communist,” and described the audience as “confused capitalists wondering how a company can exist without the urge to maximize profits.”

I would think that this sort of “profits not primary” mentality is something that the establishment could find threatening. Let’s hope it catches on as the internet continues to democratize the population’s ability to interact more directly.

This is beautiful and awesome and a great example of making enough to cover the bills without needing to max out revenue streams. Its also part of the reason why people who use Craigslist love it so much. Its not about ad clicks and money, money, money, its about connecting people.

Sad thing is that Wall Street looks upon it with disbelief, how could they NOT want to make millions and billions of dollars? Oh to be a fly on the wall after that meeting!

Craigslist is definitely a leader of the Open source movement: but this is an open source business model, not open source software. Craigslist is hardly communist: just think of all the transactions it has enabled! By removing the profit margin of the intermediary, Craigslist has expanded the number of participants in the market and increased the relative power of the individual. Milton Friedman would be proud.

Then again, providing targeted AdSense advertising DOES help your buyers find relevant information so you could make a few billion AND help the users.

Craigslist is the best example of businesses that are refusing to make money the only goal, or even the main goal.

This type of customer driven businesses run as a partner to society instead of an aggressor is the form of the future, truly Green Companies. They are hybrids of sorts, combining the best of for=profit and non-profits characteristics.

In another article in today’s NYT is the decision of Groupe Danone to build 50 fortified-yogurt plants in Bangladesh, manned not automated, with the goal of returning the only cost and 1% profit with the rest being re-invested.

This happened at the urging of Muhammad Yunus, the microcredit pioneer who recently won the Nobel Peace Prize and is financed through his micro lending bank.

Mr. Schachter and his cronies in the banking industry must recognize this emerging market, a potentially disruptive at that, that flattens the opportunity while preserving the motivation.

I’ve learned never to mistake a clear vision for short distance but when you think of the needs of the second and third worlds it is clear our current model doesn’t scale.

This new “benevolence baked in” business model looks like it may overcome the scaling problem and still provide enough compensation for people to live well, in the things that matter maybe better than they do now.

Best wishes to the individuals that are refusing to chase the gold ring, finding the brass one more satisfying.

I’ve used Craigslist for many years. The beauty of craigslist is that there is nothing corporate behind this service. No media dollars, no spin, no clutter, no need to enter your email address. It’s like a big garage (and service) sale in Central Park. Capitalist feel threatened when things get done for the greater good and not the almighty dollar. Maybe a national health care plan next.

Craiglist will be a star when IPTV kicks in. You can only shove so many ads at people before they bail. Real user-centric sites that actually serve a need beyond the Adsense-based blight of useless blogs and useless article sites built only for targeting search terms, will maintain a loyal following into the future. Methinks the poster “john” above is a Googler…..”Then again, providing targeted AdSense advertising DOES help your buyers find relevant information” Heheheh. Corporate BS.

Is it not true that these guys are making substancial sums on the idea? I read an article a few months back where the author had calculated the profitability of Craigslist as being in the $5-10mln per annum range… Forget where though.

Could it not be that:
1- They want to help people
2- They are happy getting moderately rich
3- Leaving $1-5bln on the table doesn’t bother them (for now)

A better idea may be to monetize some of the page views (very light ad coverage) and use that to help people through funding various worthwhile causes. They don’t need to give in, that’s hardly what it would be. Just my 2cents.

It’s hard to find “pure” sites on the web today. Advertising, paid search results, sponsored links and all other forms of “monetizing” content leads to less trust of their intention and quality. Some people aren’t motivated by maximizing profits – hard to grasp, but true. I’m sure Jim and Craig’s goal is to maxmimize his happiness. Once they’ve made enough to satisfy basic needs, they seem content to not chase a large amount of money. I’m not sure how they’ve managed to maintain that attitude and still live in Northern California, but that’s for another section of the NY Times altogether to dissect. One also has to think that maximizing the company’s notoriety is another goal and one they are accomplishing quite well with the company’s strategy (why did Jim appear to talk to investment analysts if he doesn’t want outside money nor to maximize his profits?). Now that he’s got the podium, the message is quite interesting to listen to.

It is also interesting to note that one of the other “pure” sites out there – del.icio.us – has already sold out to Yahoo, but I can’t notice a skewed outcome as a result. My links get saved as I save them, the search results aren’t topped by paid results and advertising, etc. Hopefully Yahoo will allow it to remain that way, or else Craig will have another feature to add for the common good (and for free).

I am a Wall Street type, owning and operating my own money management firm. I attended this presentation and agree completely with the characterization of the Craigslist reception at the conference. I loved the presentation and the reaction. Afterwards, I introduced myself to Jim and told him the discussion was very refreshing. I also told him I thought his comments were good medicine for most of the folks in the room. I wrote the following summary of Jim’s presentation for StreetInsight.com and my own client blog at NorthlakeCaptial.com:

Jim Buckmaster, CEO of Craigslist, gave a very interesting presentation in Q&A format with UBS Internet analyst Ben Schachter. Buckmaster stated that Craigslist puts the needs and wants of its users ahead of corporate goals. Craigslist is more interested in doing what it views is good for society than in maximizing profits. While this viewpoint was met with snickers and laughter by the audience, it was also clear that the company is growing rapidly and producing plenty of profits. As a political liberal, I found the discussion refreshing. As an investor, I found the discussion troubling for newspaper companies, whose classified ads are under direct attack by Craigslist. Growth at Craigslist could also limit the opportunity for Yahoo, Google, and other Internet companies to capitalize on the local classified business.

What a delightful breath of humanity is Craigslist.
It is about people helping people.
What a great moment for Mr Buckmaster to be telling the “money money money” people this.
I guess there will be no backdating of stock options or restatement of financial statements from Craigslist.
It gives me reason to go out of my way to support them.

The investment bankers attitude of “monetize everything” is not new. I am still waiting for the prospectus for the IPO of the Catholic Church, even the NAACP!
The attitude of the owner of Craigslist to run the firm to his customer’s satisfaction is also not new…but it is a movement that is coming back strong.

The creative class and entrepreneurs are firmly in control and not the IB’s…Thank Gods!

I say he just have a few ads in the bottom corner or something, take the money, & use it for something good. Create a charity or something. If big corporations are going to pay to advertise you may as well take their money & do something good with it. And who pays attention to the google ads, especially if they’re at the bottom of the page, anyway?

All I can say is Ben from UBS and the other guys who attended the conference were STUPID to be surprised.

Craigslist is in the TOP 10 sites on the internet. Any average user of craigslist knows that profit/revenue maximization is not thier goal. The whole newspaper is complaining about how craigslist without a profit motive (see the NYT article death by smiley face??) is killing thier business…

And now these analysts are surprised?

I am more focused on how come they DIDNT KNOW that Craigslist does not have a profit motive than them actually being surprised that they didnt have a profit motive.

What do media/tech bankers do all day? Arent they supposed to following this stuff?

As a finacial student it is very refreshing to read an article like this one about Craiglist doing business for the greatest good which is to serve consumer needs and wants. I hope this trend will continue breaking ground in our society.
Felipe Valenzuela

Craigslist has done more than just befuddle the Wall Street world of greed, it has provided just an ember of hope that our civilization may not be devolving into Babylon after all. Let’s hope that their example inspires others to follow.

It is definitely good to be non-profit oriented. But some times you wonder, is it better to help people by providing the free service (the people whom they are helping right now, mind you are people who can spare 10 dollars a month without any problem). The people who advertise on Craigs list some times go out and spend 10 dollars at Starbucks to buy a cup of coffee.

There are other sets of people who are so poor, they do not even have a clean cup of drinking water, or who are desperately waiting for a cure for AIDS or Cancer. So I respect the attitude of the Craigslist owners, but I think it will be a good thing if they can infact at some point of time, make money and if they are not interested in keeping the money, donate the money for a noble cause like finding a cure for a disease.

My argument is why help people who can help themselves. There is nothing noble in it, though there is nobility in caring for customers.

Dont wait for a time, when Craigs list may not be as popular and there for not as valuable. Then neither will you be noble, nor would you have helped any one.

Craigslist is awesome and I use it all the time. I am a political liberal, but economically a big fan of capitalism. Things which start for the “greater good” do not remain that way for too long without a good incentive structure.

I do not think that ‘monetizing’ things is wrong or immoral in any way. That is the way America is what it is, and I think the corporate-criticizers-type would do well to remember that.

That being said, I do hope that craigslist stays this way for as long as possible. Good job, Jim and Craig.